Competition never more intense: Norris

Commonwealth Bank chief executive Ralph Norris has told a Senate inquiry that competition among the Big Four has never been more intense and claimed his bank would not be spending millions of dollars on advertising and systems upgrades if that wasn’t case.

In a 100-minute appearance before the Senate inquiry into banking competition in Canberra on Wednesday, Mr Norris defended his remuneration package and his bank’s November rate increase – 20 basis points above the official cash rate movement.

He said while Australian lenders were now accessing more stable funding it was from more expensive sources, such as deposits, and this was driving recent bank rate increases above the official cash rate.

And he highlighted the amount being spent by CBA on advertising to support his case that banking competition had never been more intense in Australia.

“Why we’ve spent those millions of dollars is to make us a much stronger competitor," he told a Senate inquiry.

“If ... as a hard-nosed businessperson, I was to get a return through operating an oligopoly, why would I and my board spend that sort of money to get that sort of result?"

Asked about the government’s recently announced banking package, Mr Norris said it was too early to tell what effect it would have.

“I think some of the elements in the package obviously do assist in providing more competitive access to funding," he said.

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“I think the initiative around covered bonds is a good one, I think the additional funding provided through the AOFM (Australian Office of Financial Management) is obviously of benefit to smaller players."

But he rejected comments from Treasurer Wayne Swan on Sunday that no increase by banks above the official cash rate was justified.

“I don’t know where the Treasurer gets his information from but our information is contrary to that view," he said.

In light of the government’s announcement that mortgage exit fees would be abolished from July 1, 2011, he said the bank would review its fee structure and make an announcement to the market when a decision had been made.